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JESSICA HUME, Parliamentary Bureau

Aug 29, 2012

, Last Updated: 8:14 PM ET

OTTAWA - The Conservative government and Canadian automakers will be forced to follow a U.S. edict to make vehicles more fuel efficient.

On Tuesday, President Barack Obama announced new regulations that will force all vehicles sold in the U.S. to be roughly twice as fuel efficient by 2025. The administration says the new rules will initially raise the cost of a new car, but this will be offset by fuel savings.

A spokesman for Environment Canada congratulated the U.S. on this regulation.

"There are significant environmental and economic benefits to Canada harmonizing with the regulations of the U.S. auto sector because it is so integrated," Adam Sweet said.

Indeed, the primary export destination for the Ontario-based Canadian auto industry is the U.S.

Where Obama has said all new vehicles will need to attain an average of about 23 kilometres per litre by 2025 (compared with the current 12 kilometres per litre), Canada has not defined a similar goal.

Despite concerns over how vehicle prices will be affected, Canadian car companies appear on board.

"We know consumers want higher fuel efficiency and GM is going to give that to them,"' a GM spokesman said. "While the requirements are aggressive, we intend to pursue them vigorously."

American lobby group the National Automobile Dealers Association's reaction was less conciliatory.

"America's new car dealers support continuous fuel economy increases," NADA chairman Bill Underriner said in a statement. "This (initial cost) increase shuts almost 7 million people out of the new car market entirely."

NDP MP and environment critic Megan Leslie welcomes the ambitious targets and described the U.S. as effectively forcing Canada's hand at taking action to reduce greenhouse gas emissions.

"There's actually an incredible opportunity here, and I'm not just talking environment but also consumer choice," she said. "We have the skilled labour force to ensure the next generation of cars are green."